Certified Foreign Exchange

Professional

Certified Foreign Exchange Professional

www.vskills.in

Certified Certified Certified Certified Foreign Exchange Foreign Exchange Foreign Exchange Foreign Exchange Professional Professional Professional Professional
Certificate Code VS Certificate Code VS Certificate Code VS Certificate Code VS- -- -1001 1001 1001 1001
Vskills certification in foreign exchange introduces candidates to various aspects of the
largest financial market in the world trading !ank"s foreign exchange and treasur#
department risk management macroeconomic parameters and practical aspects of foreign
exchange markets$ % Vskills Certified foreign exchange professional finds emplo#ment in
various retail !anks investment !anks research firms and treasur# departments of various
&'Cs$

(h# should one take this certification) (h# should one take this certification) (h# should one take this certification) (h# should one take this certification)
*o demonstrate clear understanding of foreign exchange and practical aspects of foreign
exchange markets and to get a visi!le recognition for this knowledge
(ho will !enefit from taking (ho will !enefit from taking (ho will !enefit from taking (ho will !enefit from taking this certification) this certification) this certification) this certification)
Students looking to find emplo#ment in treasur# departments of !ank trading foreign
exchange research departments of !anks and corporate treasuries teachers of finance
managers of companies who wish to understand foreign exchange owners of small and
medium export import firms who want to have a !etter control over their foreign exchange
exposure and an#one having interest in the Foreign Exchange &arkets$
*est +etails, *est +etails, *est +etails, *est +etails,
+uration, +uration, +uration, +uration, -0 minutes
'o$ of .uestions, 'o$ of .uestions, 'o$ of .uestions, 'o$ of .uestions, /0
&aximum marks, &aximum marks, &aximum marks, &aximum marks, /0 Passing marks, 0/ 1/0234 *here is no negative marking in
this module$
Fee Structure, Fee Structure, Fee Structure, Fee Structure,
5s$ 00006- 17ncludes all taxes3

Companies that hire Vskills Certified Foreign Exchange Professionals Companies that hire Vskills Certified Foreign Exchange Professionals Companies that hire Vskills Certified Foreign Exchange Professionals Companies that hire Vskills Certified Foreign Exchange Professionals
Vskills Certified Foreign Exchange Professionals might find emplo#ment in !anks dealing
in currenc# trading and research retail !anks dealing with '57 customers for their foreign
exchange deposits and currenc# exchange firms$ *here is an emplo#ment scope in the
corporate treasuries of !ig companies as well to manage the foreign exchange risk
exposure$
Certified Foreign Exchange Professional

www.vskills.in

Table of Content
7ntroduction 7ntroduction 7ntroduction 7ntroduction
(hat is Foreign Exchange
(h# is foreign exchange important to us)
(hat is a foreign Exchange market)
Foreign Exchange as a Financial &arket
Foreign Exchange is an 8*C &arket 18ver *he Counter3
&arket Participants
9istor# of Foreign Exchange 9istor# of Foreign Exchange 9istor# of Foreign Exchange 9istor# of Foreign Exchange
:old Standard
&ain Stages of 5ecent Foreign Exchange +evelopment
7mportant landmarks of Currenc# &arkets
Foreign Exchange ;asics Foreign Exchange ;asics Foreign Exchange ;asics Foreign Exchange ;asics
5ates of Exchange
Primar# and Counter Currenc#
&arket &aker and &arket *aker
;id68ffer 5ate
&iddle 5ate
Cross 5ates
Factors affecting exchange rate fluctuations
Suppl# and demand
*he ;alance of Pa#ments
Confidence and speculation
Central !ank intervention
Exchange Control
7nterest rate differentials
<eads and <ags
9ot &one#
&a=or Currencies
Fixed Floating and +irt# Float
*rading *erminolog#
Certified Foreign Exchange Professional

www.vskills.in

Foreign Exchange 5isk Foreign Exchange 5isk Foreign Exchange 5isk Foreign Exchange 5isk
Effect of fluctuations in exchange rates, exposure and foreign exchange risk
Exchange 5ate 5isk
7nterest 5ate 5isk
Credit 5isk
Countr# 5isk
9ow to manage #our risk
>inds of Foreign Exchange &arket >inds of Foreign Exchange &arket >inds of Foreign Exchange &arket >inds of Foreign Exchange &arket
Spot &arket
Forwards &arket
Currenc# Forward Swaps
Futures &arket
Strategies using Currenc# Futures
9edging using Currenc# Futures
Speculation in Currenc# Futures
Currenc# 8ptions
Currenc# markets Currenc# markets Currenc# markets Currenc# markets in 7ndia in 7ndia in 7ndia in 7ndia
Product Specification
?ses of Currenc# Futures at 'SE
&em!ership
Clearing Settlement and 5isk &anagement
Fundamental %nal#sis Fundamental %nal#sis Fundamental %nal#sis Fundamental %nal#sis
Economic Fundamentals, *heories of Exchange 5ate +etermination
Economic 7ndicators
Financial and Sociopolitical Factors
*echnical %nal#sis *echnical %nal#sis *echnical %nal#sis *echnical %nal#sis
*he Fundamentals of *echnical %nal#sis
*#pes of charts
*rends Support and 5esistance
*rend 5eversal Patterns
*rend Continuation Patterns
:aps
Fi!onacci %nal#sis and Elliott (aves *heor#
*he Elliott (aves
Certified Foreign Exchange Professional

www.vskills.in

*reasur# *reasur# *reasur# *reasur#
5ole of *reasur#
Front 8ffice
;ack 8ffice
Credit Control
7nvestment ;ank
<argest Full Service 7nvestment ;anks that hire Foreign Exchange *raders and
%nal#sts
















Certified Foreign Exchange Professional

www.vskills.in

Course 8utline Course 8utline Course 8utline Course 8utline

7ntroduction 7ntroduction 7ntroduction 7ntroduction
Explains the concept of Foreign Exchange
Explains the importance of foreign exchange and descri!es how foreign exchange
facilitates transaction !etween entities in separate countries$
Explains what a foreign Exchange market is and the functioning of the foreign
exchange market
+escri!es the feature that makes foreign Exchange market different from other
financial markets and discusses the reason for participation in Foreign exchange
market$
Explains the reason !ehind foreign exchange !eing treated as an 8*C &arket
18ver the Counter3 and explains the various factors that influence the speculators
growth on volume$
Explains the level of participation in the foreign exchange market and ela!orates
the participation of central !ank in the foreign exchange market
+escri!es the role pla#ed !# entities in the foreign exchange market such as !anks
such as !anks inter-!ank !roker commercial companies investment management
firms retail foreign exchange !rokers non-!ank foreign exchange compan# etc$
9istor# of Foreign Exchange 9istor# of Foreign Exchange 9istor# of Foreign Exchange 9istor# of Foreign Exchange
?nderstand the working of gold standard s#stem facilitating the conversion of
currenc# into gold at a fixed rate and explains the theories !ehind the collapse of
the gold standard s#stem$
Explains the main stages in the development of the foreign exchange s#stem i$e$
from ;retton (oods s#stem to the development of Euromarkets$
Explains the important landmarks of Currenc# &arkets
Foreign Exchange ;asics Foreign Exchange ;asics Foreign Exchange ;asics Foreign Exchange ;asics
Provides details on the exchange rate of currencies in foreign exchange dealing
Explains the concepts of pricing of currenc# in terms of Primar# and Counter
Currenc#
?nderstand the process of .uotation of currenc# involving two parties market
maker and market taker
Explains the concept of ;id68ffer 5ate
?nderstand the purpose of middle rate and Cross 5ates
Certified Foreign Exchange Professional

www.vskills.in

?nderstanding the reasons for exchange rate fluctuation and the factors affecting
these fluctuations$
Explains the factors affecting demand and suppl# and the inverse relation !etween
them$
Explains the concept of ;alance of Pa#ments
?nderstand the relation !etween confidence of a dealer in the future positioning
and speculation in a currenc#$
Explains the need for intervention !# the Central !ank$
Explains Exchange control and the factors affecting the exchange rates
Explains the concept of 7nterest rate differentials and the momentum of pa#ment
in terms of leads and lags
?nderstand the concept of hot mone# in terms of availa!ilit# of international
mone# at a given point of time$
Explains the ma=or currencies !eing exchanged in the foreign exchange market
such as ?S +ollars Euro @apanese #en ;ritish Pound Swiss Franc Canadian
+ollar and %ustralian +ollar$
?nderstand the methods emplo#ed !# government to determine the value of the
domestic currenc# in terms of other currencies !# the method of fixed floating and
dirt# Float
?nderstanding the trading terminologies used when trading in the foreign exchange
market$
Foreign Exchange 5isk Foreign Exchange 5isk Foreign Exchange 5isk Foreign Exchange 5isk
Explains the effect of fluctuations in exchange rates and exposure to foreign
exchange risk on exporters and importers$
?nderstand the conse.uences of exchange rate risk due to continuous shift in the
worldwide market demand and suppl# and explains the t#pe of position limits
1+a#light and 8vernight3
Explains the interest rate risk pertinent to currenc# swaps forward outright futures
and options$
Explains the meaning and forms of Credit 5isk$
+escri!es the intervention of government in the foreign exchange market causing
Countr# 5isk
?nderstanding the management of risk !# technical anal#sis 1also called charting3 to
evaluate !oth risk and reward associated in trading$
>inds of Foreign Exchange &arket >inds of Foreign Exchange &arket >inds of Foreign Exchange &arket >inds of Foreign Exchange &arket
Explains the procedure of trading in Spot &arket and the reasons for the
popularit# of currenc# spot trading$
Explains the concept of forward exchange contracts disadvantages of forward
contracts and the procedure for calculating fixed forward rates in Forwards &arket$
Certified Foreign Exchange Professional

www.vskills.in

+escri!es the process of determination of forward rates !# means of currenc#
interest rates and forward points$
Explains the principle of Currenc# Forward Swaps the t#pes of currenc# swaps and its
main uses$
?nderstand the working of currenc# futures in the Futures &arket features of
currenc# swaps and difference !etween futures and forward contracts$
Explains the interest rate parit# theor# and the procedure of pricing of future
contracts$
7llustrating the strategies using currenc# futures
+escri!es the procedure of hedging in currenc# market through two positions
short-hedge and long-hedge$
Explains the speculation in currenc# futures when anticipating differences in spot
price and the prevailing future prices$
?nderstanding the functioning of Currenc# 8ptions and the ma=or factors that have
an impact on the option prices$
Explains the process of measurement of the impact of the currenc# prices on the
options premium in terms of +elta :amma Vega and *heta$
Currenc# markets in 7ndia Currenc# markets in 7ndia Currenc# markets in 7ndia Currenc# markets in 7ndia
Explains the Product Specification 1futures3 in terms of underl#ing currenc# future
contracts trading hours siAe of the contract .uotation tenor of the contract
availa!le contracts mechanism for settlement and the final settlement da#
+escri!es the specifications of the contract specifies the permitted lot siAe tick
siAe .uantit# freeAe !ase price$
Explains the procedure of price dissemination setting of price ranges of contract to
avoid erroneous order entr#$
Explains the trading s#stem at 'SE 1'E%*3 order condition time related
condition and pricing conditions laid down$
Explains trading underl#ing versus trading futures$
+escri!es the procedure of hedging at times of speculation ar!itrage strategies used
for tapping the price-differentials in two or more market$
Explains the different t#pes of mem!ers admitted in the currenc# derivative
segments such as online trading mem!ers of 'SE !oth trading mem!ers of 'SE
and clearing mem!ers of 'SCC< professional clearing mem!ers of 'SCC<
+escri!es a!out the participants eligi!ilit# criteria for mem!ership of an individual
partnership firms and corporate$
Provides the eligi!ilit# criteria of professional clearing mem!ers 1PC&3$
Explains the entities involved in clearing procedure position limits margins mode
of pa#ment settlement of contracts
Certified Foreign Exchange Professional

www.vskills.in

Fundamental %nal#sis Fundamental %nal#sis Fundamental %nal#sis Fundamental %nal#sis
?nderstanding the Economic Fundamentals for determining the theories of
exchange rate with the help of concepts such as purchasing power parit# and theor#
of elasticit#$
Explains the Portfolio-;alance approach and the s#nthesis of traditional B modern
monitor# views$
Explains the various economic 7ndicators such as :'P :+P consumption
spending :overnment spending investment spending net trading capacit#
utiliAation etc$
Explains a!out various inflation indicators and their measurement using economic
tools such as Producer Price 7ndex 1PP73 Consumer Price 7ndex 1CP73 :'P
deflators :+P deflators Emplo#ment Cost 7ndex 1EC73 C5; 7ndex and @ournal
of commerce 7ndustrial price index 1@oC3$
Explains the role of financial and Sociopolitical Factors and descri!es the political
events and crisis in the trading s#stem$
*echnical %nal#sis *echnical %nal#sis *echnical %nal#sis *echnical %nal#sis
Explains the Fundamental principles of *echnical %nal#sis !ased on +8(
*heor#
?nderstanding the different t#pes of charts used for representation$
Explains a!out different trends representing the market movement trend line and
descri!es a!out the lines of support and resistance$
Explains a!out the trend reversal patterns and trend continuation patterns
?nderstanding of the &athematical &odeling &ethods 17ndicators3$
Explains the Fa!onacci %nal#sis and Elliot (aves theor#$
*reasur# *reasur# *reasur# *reasur#
Explains the role and responsi!ilities of treasur#
Explains the main activities performed !# 7nvestment !anks and other venture in
which investment !ank operations can !e integrated$
?nderstanding the procedure involved in managing Front-8ffice &iddle-8ffice
and ;ack-8ffice operations$

Certified Foreign Exchange Professional

www.vskills.in


Sample Cuestions Sample Cuestions Sample Cuestions Sample Cuestions

1$ %n appreciation 1$ %n appreciation 1$ %n appreciation 1$ %n appreciation of the 5upee relative to the ?S +ollar would !e expected to of the 5upee relative to the ?S +ollar would !e expected to of the 5upee relative to the ?S +ollar would !e expected to of the 5upee relative to the ?S +ollar would !e expected to
have which of the following effects) have which of the following effects) have which of the following effects) have which of the following effects)
%$ 7ncrease ?S exports to 7ndia
;$ 7ncrease ?S imports from 7ndia
C$ 5aise the cost to %mericans for 7ndian imports
+$ Create ;alance of Pa#ments surplus for 7ndia
0$ (hich of the s#stems occurred first in the histor# of international 0$ (hich of the s#stems occurred first in the histor# of international 0$ (hich of the s#stems occurred first in the histor# of international 0$ (hich of the s#stems occurred first in the histor# of international ! !! !anking ) anking ) anking ) anking )
%$ Post ;retton (oods
;$ European &onetar# ?nion
C$ :old Standard
+$ :old Exchange Standard
D$ (hen %mericans or foreigners expect the return on EEEEE deposits to !e hi D$ (hen %mericans or foreigners expect the return on EEEEE deposits to !e hi D$ (hen %mericans or foreigners expect the return on EEEEE deposits to !e hi D$ (hen %mericans or foreigners expect the return on EEEEE deposits to !e high gh gh gh
relative to the return on EEEEE deposits there is a higher demand for dollar relative to the return on EEEEE deposits there is a higher demand for dollar relative to the return on EEEEE deposits there is a higher demand for dollar relative to the return on EEEEE deposits there is a higher demand for dollar
deposits deposits deposits deposits and a correspondingl# lower demand for foreign deposits and a correspondingl# lower demand for foreign deposits and a correspondingl# lower demand for foreign deposits and a correspondingl# lower demand for foreign deposits
%$ dollar4 dollar
;$ dollar4 foreign
C$ foreign4 dollar
+$ foreign4 foreign
F$ 7f the French demand for %meric F$ 7f the French demand for %meric F$ 7f the French demand for %meric F$ 7f the French demand for %merican exports rises at the same time that ?$S$ an exports rises at the same time that ?$S$ an exports rises at the same time that ?$S$ an exports rises at the same time that ?$S$
productivit# rises relative to French productivit# then in the long run productivit# rises relative to French productivit# then in the long run productivit# rises relative to French productivit# then in the long run productivit# rises relative to French productivit# then in the long run
%$ the euro should appreciate relative to the dollar
;$ the dollar should depreciate relative to the euro
C$ the dollar should appreciate relative to the euro
+$ it is not clear whether the euro should appreciate or depreciate relative
to the dollar$
/$ 7f porta!le disk pla#ers made in China are imported into the ?nited States the /$ 7f porta!le disk pla#ers made in China are imported into the ?nited States the /$ 7f porta!le disk pla#ers made in China are imported into the ?nited States the /$ 7f porta!le disk pla#ers made in China are imported into the ?nited States the
Chinese manufacturer is paid in Chinese manufacturer is paid in Chinese manufacturer is paid in Chinese manufacturer is paid in
%$ +ollars
;$ Chinese Guan
C$ Euros or some third currenc#
+$ 7nternational monetar# credits
%nswer, 1 1C3 0 1C3 D 1;3 F 1C3 / 1;3 %nswer, 1 1C3 0 1C3 D 1;3 F 1C3 / 1;3 %nswer, 1 1C3 0 1C3 D 1;3 F 1C3 / 1;3 %nswer, 1 1C3 0 1C3 D 1;3 F 1C3 / 1;3